Torstar swings to loss on writedown, weak ad revenue

Torstar Corp. posted a $70.8-million loss as the print advertising market continued to erode and a shift away from books took its toll on its Harlequin division.

The company, which publishes the Toronto Star and dozens of community weeklies in addition to publishing books under its Harlequin banner, has faced a difficult print advertising market as companies look to other methods to reach consumers. Ad revenue fell 16 per cent at the Star over the summer, at a time when the paper's profile was skyrocketing thanks to its coverage of Toronto Mayor Rob Ford and his troubles.

The loss underscores the challenges facing publishers across North America: Readership is strong, but more consumers are reading online. And print advertisements still make up the bulk of the company's revenue, but they are falling off faster than digital revenue is increasing. Torstar has responded by cutting jobs, outsourcing much of its editing and page design and building a digital subscription package for its online readers.

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Star publisher John Cruickshank said it was too early to say how the paywall was working for the paper, but said it seems that single-copy sales have stabilized since its introduction and could encourage people to hang on to their print subscriptions.

"After six months we'll have a better sense of where it's tracking," he said. "It really is too early to say, except that we're having the same kind of experience others are having in terms of growth in subscriptions and diminution of page views."

Torstar said the cuts it has made this year will save it $26-million a year, but warned the ad market doesn't appear to be improving. That echoes comments made by Postmedia Network Inc. late last month, as that company posted a $36-million loss and said it was seeing weakness across all major advertising categories.

"The media segment continued to face challenges as a result of shifts in spending by advertisers combined with economic uncertainty," Torstar stated. "For the balance of the year, print advertising revenues are likely to continue to be under pressure."

The loss included an $85-million non-cash writedown, a one-time accounting measure to reflect the declining value of its assets. Revenue at the company decreased by 8 per cent from the same quarter last year to $328-million, while the $70.8-million loss compared to an $11-million profit a year ago.

The Toronto Star saw revenue drop 9 per cent in the quarter, with print advertising down 16.6 per cent. Its Metroland division, which publishes community papers, saw revenue fall by 3.5 per cent as print advertising decreased by 10 per cent from a year ago.

"We remain focused on resizing the cost base but are also very disciplined and committed to continue to invest in those areas of highest value to our customers as we adapt to the changing media environment," chief executive officer David Holland said in a statement.

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Revenue at its book publishing division, meanwhile, slipped 9 per cent.

"The decrease in North American revenues was the result of declines in the retail print and direct-to-consumer channels, which were only partially offset by growth in digital revenues," the company stated. "Overseas revenues remained weak in the quarter affected by challenging economic conditions, particularly in Europe. Consistent with North America, overseas growth in digital revenue was insufficient to offset print declines."

It isn't just the print media market that is facing difficulties. Earlier in the week, Rogers Communications Inc. cut jobs in its media division amid declining advertising revenue.

The cuts affected 94 people (or 2 per cent of the media division's work force), and were distributed across Rogers Communication Inc.'s sprawling media division that includes some of the largest magazines in the country, the City and Omni television networks, 55 radio stations and specialty channels such as Sportsnet and FX Canada.